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What is better NTFS or FAT32?

One of the most important advantages that you gain when choosing the NTFS file system over older file systems such as FAT, is much greater control over who can perform what sorts of operations on various data within the file system. FAT was designed in the era of single-user PCs, and contains virtually no built-in security or access management features. This makes it quite poorly-suited to multi-user business environments--can you imagine running a business where any user in the company was free to roam through the file system and open any documents he or she found? This is not a wise way to run a server! In contrast to FAT, NTFS offers a secure environment and flexible control over what can be accessed by which users, to allow for many different users and groups of users to be networked together, with each able to access only the appropriate data.
http://www.pcguide.com/ref/hdd/file/ntfs/sec-c.html

What OS can use NTFS?

Linux kernel 2.2, Windows,FreeBSD, eComStation and Mac OS X versions 10.3 and later offer read-only NTFS support (there is a beta NTFS driver that allows write/delete for eComStation, but is generally considered unsafe). A free third-party tool for BeOS, which was based on NTFS-3G, allows full NTFS read and write. The read/write NTFS-3G driver has been also ported to FreeBSD, Mac OS X, NetBSD, Haiku and FreeDOS.

A commercial read/write driver for DOS called "NTFS4DOS" also exists.
http://en.wikipedia.org/wiki/NTFS#Interoperability

What conversion issues exist for file system conversions?

when files are copied or moved between NTFS and non-NTFS partitions, the OS needs to convert timestamps on the fly. But if some files are moved when daylight saving time (DST) is in effect, and other files are moved when standard time is in effect, there can be some ambiguities in the conversions. As a result, especially shortly after one of the days on which local zone time changes, users may observe that some files have timestamps that are incorrect by one hour. Due to the differences in implementation of DST between the northern and southern hemispheres, this can result in a potential time stamp error of up to 4 hours in any given 12 months.
http://en.wikipedia.org/wiki/NTFS#Compatibility_with_FAT

How easy is it to edit an encrypted file partition?

Too easy! (Gain full access to NTFS partitions under Linux Paragon NTFS for Linux gives transparent access to any NTFS partition under Linux operating system. So you and any application can browse these drives, read and change files, copy and create new files and folders. Everything absolutely transparently.)
http://www.filedudes.com/Paragon_NTFS_for_Linux-download-8519.html

By default, NTFS creates an 8.3 filename every time it creates a long filename, which adds a bit of time to the file creation process. To speed things up, you can disable short filenames using the fsutil command:

fsutil behavior set disable8dot3 1

Restart your machine for this to take effect. A couple of caveats:

* You'll typically notice a performance difference only on drives that have a very large number of files (300,000 or more) but relatively few folders, and where a lot of your files have names that start similarly (for instance, NTFS Performance Hacks version 1.doc, NTFS Performance Hacks version 2.doc, and so on). That's because if you have a lot of files that start with the same characters in their filenames and occupy the same folder, NTFS has to work harder (and take more time) to generate unique 8.3 names for these files.
* If you have an older version of Microsoft Office or some older third-party apps, they may not work properly if 8.3 names are disabled. So test first before you mass-implement this hack.
http://www.windowsdevcenter.com/pub/a/windows/2005/02/08/NTFS_Hacks.html

Name Your Files Appropriately

Let's say you can't disable 8.3 filenames because of older software on your machine. You can still improve NTFS performance by choosing a naming scheme for your files so that files located in the same folder differ at the start of their names instead of at the end. So for example, instead of

That way NTFS won't have to work so hard to generate a unique 8.3 name for each file in the folder.
http://www.windowsdevcenter.com/pub/a/windows/2005/02/08/NTFS_Hacks.html

Use More Partitions

In Windows 2000, when you partition a large disk (50GB or more, say) into several smaller NTFS volumes (10GB each), you can speed disk performance by up to 10 percent. NTFS on Windows XP has been improved to perform better overall, but you can still squeeze a percent or two of better performance out of a large disk by partitioning it into several smaller volumes.
http://www.windowsdevcenter.com/pub/a/windows/2005/02/08/NTFS_Hacks.html

Plan Your Cluster Size

The default cluster size on NTFS volumes is 4K, which is fine if your files are typically small and generally remain the same size. But if your files are generally much larger or tend to grow over time as applications modify them, try increasing the cluster size on your drives to 16K or even 32K to compensate. That will reduce the amount of space you are wasting on your drives and will allow files to open slightly faster.

Two caveats, though:

* If you want to compress older files to save disk space using NTFS compression, you have to leave the cluster size at 4K.
* The smaller your files (compared with the cluster size), the more fragmented your volume will tend to become over time.
http://www.windowsdevcenter.com/pub/a/windows/2005/02/08/NTFS_Hacks.html

Defragment Regularly

Fragmented drives increase the time it takes for applications to open, close, create, or delete files. A good practice is to use Windows XP's Disk Defragmenter tool to defrag your drive at least once a week, especially if you run applications that frequently modify files and you have a lot of files on your drives. If you like, you can use the Scheduled Task Wizard to automate this process.
http://www.windowsdevcenter.com/pub/a/windows/2005/02/08/NTFS_Hacks.html